Negotiation Tactics to Utilize With Suppliers
1. Separate negotiator and relationship owner
One effective technique that ERA uses to manage a fair negotiation process is to consider bringing in a third-party or designating a different employee within the company to be responsible for facilitating a new contract. Doing so removes the emotional aspect of discussions – and it takes the pressure off the individual who directly deals with the supplier. A third party can also help negotiate more significant savings. For example, a supplier may initially offer a 5 percent discount, whereas a knowledgeable third party may get a vendor to agree to a 20-25 percent discount.
2. Help the supplier save money
A supplier will likely be more accommodating during the negotiation process if you can convey that your organization is willing to find ways to optimize their costs associated with serving your organization. For example, if your organization can consolidate deliveries from multiple times per week to once a week, it will streamline your supplier’s delivery process. If there are fewer deliveries placed or shipments are sent to a centralized facility, it is ultimately more economical for your supplier. As a result, they may provide you with a bonus or incentives that allow your organization to capture savings as well.
3. Quickly carry out a favorable contract offer
Once a contract with favorable terms has been reached, it’s important to sign and put it into effect before the offer expires. Most offers are good for 30-60 days. Stakeholders should move forward with the vendor to maintain momentum and secure advantageous terms. This also helps lock in competitive pricing that can ultimately save money throughout the duration of the contract.